South Africa and the EU: a mutually beneficial partnership

South Africa’s strategic partnership with the EU helps spur investment, innovation and job creation. Paolo Borzatta of think tank The European House-Ambrosetti and Stavros Nicolaou of pharmaceutical company Aspendiscuss how both parties can strengthen economic relations and foster social innovation.

As the UK’s Brexit process fuels uncertainty around trade deals and relationships in Europe, both the UK and EU-27 are looking for more global opportunities for partnership and investment.

Well established partnerships are often ignored. South Africa and the EU have a longstanding cultural and historical relationship. South Africa is one of the EU’s 10 strategic partners. As with all the others – which include Brazil, China, India, Russia and the US – this bilateral relationship aims to foster international co-operation and deeper investment in order to provide mutual benefits.

2017 marks the 10th anniversary of the Joint Action Plan, a forward-looking platform that facilitates wide-ranging co-operation between South Africa and the EU. The joint action plan sets out to enhance the strategic partnership between the two areas, covering areas of co-operation such as development, trade and innovation. It also encompasses encouragement to work together in fields such as climate change, social affairs, education and training, and the crackdown on international crime.

Further opportunities

As political dynamics change, South Africa-EU relations are facing a significant turning point as Brexit will influence the geopolitical context and both trade and investment patterns between South Africa and Europe. Although the outcome of Brexit is still uncertain, one possibility is that it pushes the UK towards a tighter ‘special relationship’ with the US. This could result in increased tensions for geopolitical entities which are currently strategic for South Africa, especially with other BRICs (Brazil, Russia, India, China) countries.

Also, it can be argued that Brexit is bringing other EU members closer and is opening up further opportunities for European-wide co-operation with South Africa in areas such as defence, migration, investment and education. A more closely integrated EU-27 often has a more transparent agenda of joint economic development with South Africa and the Southern African Development Community Countries, whereas BRICs countries might have less transparent agendas.

The EU is South Africa’s biggest export market and its biggest source of foreign direct investment. EU-based companies that operate in South Africa have invested in a wide range of resources which have become a major contributor to South Africa’s industrialisation and transformation.

South Africa has also benefitted from a flood of job creation from investment, creating close to 350,000 jobs. According to Marcus Cornaro, the EU’s ambassador to South Africa, the EU-funded Risk Capital Facility and other local economic development programmes have provided support to more than 150 smaller businesses, creating about 12,000 jobs.

Two-way street

Current trade and investment relations are heavily influenced by commodities. However, South Africa is gradually moving from mainly commodity-based products towards manufacturing. This is why it is important to develop deeper relations between southern African and European manufacturing systems to encourage more investment in resources and innovation to drive economic performance.

Although the relationship has encouraged investment into South Africa, the relationship is not one-way. South African companies are also investing back into Europe to ensure the economic growth of both areas. For example, Aspen Pharmacare, a South African multinational, is now considered one of South Africa’s largest investors in Europe. Aspen has a significant manufacturing presence in countries such as France, Germany, and the Netherlands. According to senior executive Stavros Nicolaou, it will continue to invest in both production capacity and an innovative product pipeline in Europe. Based on its recent acquisition of a portfolio of key anaesthetic products, it has set out to continue an innovative supply of affordable quality medicines to European patients.

To develop a meaningful South Africa-EU partnership, both parties need to ensure their plans for growth, address common challenges, shared values and mutual interests.

Paolo Borzatta is senior partner of The European House-Ambrosetti and managing director of Ambrosetti Group in London. The European House-Ambrosetti is a professional group that supports companies in the integrated and synergic management of value-creating processes.

Stavros Nicolaou is Aspen’s senior executive responsible for strategic trade based in South Africa. Aspen is Africa’s largest and the world’s ninth largest generic pharmaceutical company by revenue.

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